The proposed personal income tax relief of R9.5 billion in the budget announcement is a welcome financial aid for all South African consumers. However, it is crucial that consumers use this additional benefit to improve their current financial situation and achieve their long term financial goals.
This is according to Justus van Pletzen, Chief Executive Officer of the Financial Intermediaries Association of Southern Africa (FIA), who says that with the threshold for income tax being increased consumers may be tempted to spend this additional income on short term consumption, such as a new car, or paying for a holiday. “It is vital for consumers to realise the purpose of the tax break is not to spend more money, but to save and ultimately better their financial situation.”
“Consumers should use this extra income towards boosting, or initiating, long term financial investments such as retirement plans and reputable investment opportunities that will benefit them financially in the long run.”
He says another good way to utilise this additional income is to protect their current assets against possible risks by putting it towards vital insurance needs. “For those consumers who may have had to cut back on critical expenses, such as long term or short term insurance cover or medical aid, now is the time to look at either topping up their current cover or taking out cover if they currently do not have any.
“Many South Africans are facing major problems with their level of debt. Therefore, paying off some debts, or making contributions towards paying off these debts, is also a good way to use this additional saving. This will in turn help to better their credit record and enable them to become more financially stable.”
He says for those consumers who want to ensure they make the most of this tax break, employing the services of an experienced financial adviser who can make recommendations based on someone’s personal circumstances and steer them in the right direction in terms of meeting their financial goals is the best solution.